Chinese property developer Ronshine China Holdings braved turbulent stock markets on Thursday to price Hong Kong's first initial public offering of 2016.
The Fujian-based mid-to-high end developer raised HK$1.81 billion ($233 million) after settling the final offer price for 337.5 million shares at HK$5.36 per share, the lowest end of an indicative range that went as high as HK$6.13, sources familiar with the situation said.
The deal marks a solid start for Hong Kong, the world's largest IPO fundraising hub last year, as it looks to retain its crown this year against the likes of New York, London, and Shanghai.
The Hong Kong Stock Exchange raised a total of $33.7 billion for newly listed companies in 2015. The New York Stock Exchange and Nasdaq ranked second and third, raising $19.6 billion and $18 billion each, respectively.
Ronshine China, which develops residential properties in the eastern coastal regions of China, chose to build its books through the end of last year, perhaps to avoid market volatility.
But the plan did not appear to go as well as it wished as the Hong Kong market tumbled 2.6% on the year's first day of trading on Monday, tracking the 7% plunges in the Shanghai and Shenzhen markets. That triggered a so-called circuit-breaker mechanism and saw trade suspended, an outcome repeated on Thursday as shares again tumbled after the Ronshine China IPO closed late Wednesday.
However, one source said the order book remained pretty much unchanged through the week, partly helped by the fact the shares were priced at a deep discount of 75% to its net asset value, or 4.4 times forward price-to-earnings on a syndicate consensus basis.
Depressed market
One barometer investors will be closely watching is the developer’s ability to raise prices after a sharp plunge in 2014 and 2015, when real estate prices tumbled nationwide due to cooling demand and oversupply.
Average selling prices for Ronshine-developed properties fell 40% to Rmb9,820 ($1,499) per square metre as of the end of June 2015 from Rmb16,561 in 2014.
Fresh capital from the listing is badly needed for Ronshine to reduce its sky-high gearing ratio, which stood at 1,540% as of the end of 2014. That figure more than halved to 640% by the end of June last year after a capital injection from its controlling shareholder -- the family trust of company chairman Ou Zonghong -- but is still much higher than the market average for Chinese property companies.
Shares in Ronshine are set to start trading in Hong Kong on January 13.
ICBC International is the sole sponsor of the IPO. GF Securities, Guotai Junan Securities, and Haitong Securities are joint bookrunners.
